Does a 529 plan cover educational expenses without a 1098T?

crossdonkey · ‎March 8, 2021

My son took a course at an accredited university the summer of 2020 (In between his junior and senior year in high school). At first they charged us for the course but then credited it back. His university transcript shows the course as completed. We used the 529 plan to pay for a laptop so that he could take the online course. I have received the 1099-Q for that. However, the university does not need to send us a 1098T. When entering all the information into TT, I'm still being taxed on that distribution for his laptop. I have followed the instructions for having not received the 1098T and filled in tuition as $0. So, I'm wondering if it's either TT doesn't have this scenario worked into it (no tuition + distribution) or I'm not eligible to take that distribution tax free even though he was enrolled at a university for a single course?

Hal_Al · ‎March 8, 2021

Yes, you are eligible and the computer cost is eligible.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."

Otherwise. you need to answer yes to the books cost question, then enter the computer cost as the subsequent screen.

Alternatively, high school expenses are now eligible for a 529 distribution. The secondary school expenses boxes come up in the 1099-Q section of TurboTax (rather than later in the educational expenses section)

View solution in original post

Hal_Al · ‎March 8, 2021

Yes, you are eligible and the computer cost is eligible.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."

Otherwise. you need to answer yes to the books cost question, then enter the computer cost as the subsequent screen.

Alternatively, high school expenses are now eligible for a 529 distribution. The secondary school expenses boxes come up in the 1099-Q section of TurboTax (rather than later in the educational expenses section)